Hub for foreign investment: How to register a company with foreign capital in Bali

As such, the number of investment projects implemented in Indonesia and Bali continues to trend upwards year after year. Over the past few years alone, droves of international startups have sprung to life on the island, transforming Bali into far more than a holiday spot for Southeast Asian travellers. Several key factors make Bali an attractive launchpad for global investors, including low costs of living, affordable property rental rates, and a comparatively inexpensive local workforce. Additionally, the proliferation of shared coworking spaces fuels even more startup activity across Bali.

This article examines PT PMA registration in detail. PT PMA companies enable foreigners to establish businesses of any size within Indonesia. By streamlining the registration process, these corporate entities encourage further foreign direct investment into Bali and beyond.

Brief overview of foreign investment structures in Bali

For overseas investors looking to incorporate in Indonesia, Bali offers two main corporate entities — the PT PMA company and the representative office (KPPA).

In summary, PT PMA companies allow overseas investors to conduct trade in Indonesia, while representative offices provide a lower-cost means to test the market. Bali offers an attractive destination for foreign direct investment through both entry points.

Requirements for setting up a PT PMA in Bali

Key considerations

Any enterprise with foreign shareholding qualifies as a foreign investment company or PT PMA under Indonesian Law. PT PMAs allow for full or partial foreign ownership. Additional benefits to registering a company in Bali include:

• Reduced or waived import duties on productive machinery, equipment, or goods not available domestically.
• Temporary exemption from import duties on auxiliary materials and raw inputs meeting specific stipulations.
• Removal of VAT on imported goods or production equipment not obtainable locally.
• Land and building tax incentives, particularly for firms in special economic zones.

It is vital to note that some Indonesian industries have foreign investment restrictions:

• Certain sectors permit only closed-end contributions up to set ceilings.
• Some business categories mandate minimum domestic ownership levels (e.g. 10% open investment, 90% closed).

To determine which Bali industries welcome overseas capital and appropriate investment structures, consult the Negative Investment List issued by Indonesia's BKPM. This authoritative guide outlines foreign participation allowances across all sectors and gets updated regularly. By adhering to prevailing BKPM policies and leveraging PT PMA incentives, investors can successfully establish foreign-owned companies in Bali.

• Effective from 2 June 2021, the new PT PMA minimum capital threshold requirement of IDR 10 billion and Indonesia's ever-expanding negative foreign investment list are designed to attract high-value, capital-intensive foreign projects with greater viability. Accordingly, all new investors should consider Indonesia's growing capital commitments when forming and strategically planning the conversion of PT PMA.
• A PT PMA requires at minimum two founders, one Indonesia-based director, and one authorized representative. If appointing two founders, one must comprise a foreign individual or entity. Directors helming Bali-based PT PMAs must also apply for a KITAS permit.
• Securing property with clearance for commercial activities via an IMB permit is essential. The permit must explicitly approve the proposed business classification at the given location.
• Business permits and licences vary by industry in Bali. Different state agencies oversee licensing for specific sectors.

Launching a PT PMA in Bali: Registration process

1. Select the right business classification to determinate a permitted share of foreign vs. domestic ownership per the target industry.
2. Seek name approval.
3. Draft articles of incorporation and corporate bylaws.
4. Obtain tax & business ID numbers (NPWP/NIB, respectively).
5. Apply for sector-specific licences prior to opening.

The PT PMA documents' registration package comprises the company name, activities, deed of establishment, NPWP, NIB certificate, lease agreement, director identities, and more. Streamlining this extensive process with an advisory team is highly advisable for investors new to Indonesia.

PT PMA for real estate accruing in Bali

Foreign nationals aiming to buy property in Indonesia must first establish a foreign investment firm, or PT PMA. The PT PMA entity can then apply for specified land rights to complete transactions.

The main title conferring conditional usage rights is an HGB certificate, which translates to “Contingent Right to Build and Use Land”. HGB status allows development and utilization of property for an initial period of 20 years, renewable three times up to a maximum tenure of 80 years.

Another option is securing Hak Pakai rights, meaning “Conditional Possession Rights”, which permit occupying premises and facilities situated on the land.

Both the PT PMA registration process and obtaining property certificates in Bali involve extensive legal formalities unique to Indonesia. Hence, engaging an advisory firm well-versed in Bali’s regulatory climate is highly advisable when structuring real estate acquisitions.

Experienced consultants can offer authoritative guidance on meeting PT PMA minimum capital rules, acquiring appropriate land titles, navigating complex regulations, and devising a strategic plan aligned with the foreign investor's commercial interests. With so many hurdles to surmount, having an expert local partner paves the way for seamlessly purchasing and holding real estate in Bali over the long term.

Business Visas in Bali: Securing investor KITAS Visas for PT PMA directors and shareholders

Foreign nationals helming a PT PMA in Bali must obtain the correct long-term business visa permitting work and residency. Indonesia issues specific investor visas tied to capital contributions into local firms.

The Investor KITAS comes in both 12-month and 24-month validity periods (313 and 314 types, respectively).

Key requirements include:

• PT PMA directors and shareholders qualify by investing a minimum IDR 1 billion into the company’s paid-up capital. Passports must remain valid for at least 18 months or 30 months (for 313 and 314 types, respectively) beyond the visa’s expiry date.
• For minority stakeholders not occupying corporate leadership positions, the investment threshold increases to IDR 1.25 billion. The PT PMA’s total invested capital must also surpass IDR 10 billion.

Meeting these benchmarks allows foreign nationals to apply for Investor KITAS status. The visa permits multiple entries into Indonesia to manage day-to-day PT PMA operations in Bali over an extended term. Keeping abreast of the latest business visa qualifications and securing expert support during the application process is advisable for all PT PMA investors and directors.

PT PMA tax obligations in Bali

Incorporated PT PMAs bear extensive tax and reporting duties when operating in Indonesia. All foreign investment firms in Bali must file annual income tax returns alongside quarterly activity reports.

Standard corporate tax rates

• 11-22% on net profits if annual revenue tops IDR 4.8 billion
• Flat 22% rate applied if turnover exceeds IDR 50 billion
• 0.5% monthly rate on gross income when revenue falls below IDR 4.8 billion

Quarterly reports

These submissions generally detail key statistics like profit and loss, headcount, and other performance indicators over the latest three-month period. Skipping the quarterly filing can spur tax authorities to launch an audit, so compliance remains imperative.

By fulfilling all tax calculations, payments, and documentation properly and punctually, PT PMAs avoid steep penalties or disruptive government probes. With multiple levies and filings in play, many companies retain tax consultants to ensure full conformity with Indonesia’s tax code. Keeping sound financial records right from the start provides the necessary grounding to handle taxes while building the PT PMA.

Conclusion

As one of Indonesia’s foremost tourism hotspots, Bali generates immense visitor spending and commands global name recognition. The local administration continues streamlining startup and foreign investment rules to further stoke economic growth. For entrepreneurs, Bali provides an engaging backdrop. Easy access to coworking spaces, incubators, and networking circles foments innovation. The island’s dynamic habitat caters well to testing creative business concepts primed for regional expansion.

The maturing business ecosystem makes Bali an ideal point of entry into Indonesia and Southeast Asia, especially for businesses with strong ambitions. To surmount regulatory complexities, overseas investors should engage an advisory firm versed in current PT PMA registration policies and procedures. With the proper local support, Bali offers an alluring balance of lifestyle quality and commercial opportunity to build the company abroad.